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CASHING IN ON HURRY UP Serge Crasnianski discovered the need for fast service when he lost his ignition key as a student. Since then, mixing charm, drive, and hype, the glib Frenchman has hit it big in the U.S. with his one-hour photo-processing company called KIS.

By Shawn Tully RESEARCH ASSOCIATE Lorraine Carson

February 4, 1985

(FORTUNE Magazine) – A LANKY entrepreneur named Serge Crasnianski has built a worldwide business on a single premise: when people want something done, they want it done right away. His French-based Key Independent System (KIS) started with a group of compact machines that cut keys, print business cards, engrave bracelets, and put new heels on shoes, all on the spot. Lately KIS has been turning the film-processing business upside down with a small, relatively inexpensive machine that develops photographs in half an hour. And it is about to introduce a cheap color copier to compete with Xerox and Canon. KIS has cut its niche with a laser-sharp strategy. It aims all its machines at retailers looking for profitable sidelines. The devices are designed to operate simply, so florists can become part-time key makers and auto mechanics can learn to print pictures. The photo processor--which KIS calls a mini-lab--has been the company's biggest winner. It accounts for more than 50% of sales and has spread around the world from Peking to Melbourne. Sales in the U.S., the company's biggest market outside France, more than quintupled to $123 million for 1984. Crasnianski hopes to keep sales soaring with a steady stream of fresh products. Besides the new color copier, the key, printing, and shoe repair machines will make their U.S. debut sometime this year. KIS is an extension of Crasnianski's personality: good and bad. He runs the company from cramped quarters in his hometown, the sleepy city of Grenoble in the French Alps. But there's nothing sleepy about KIS. Driven by the boss's towering ambition for growth, the company is brash and combative. Gung-ho sales managers flourish or disappear. Says a former partner, ''His method is to go into a country, make a big sale, charge as much as possible, and get out.'' This slashing approach has infuriated some customers, former employees, and distributors, and provoked 13 lawsuits from customers. But even KIS's critics admit that Crasnianski has worked wonders with a blend of research and hype. The hype has created a distorted impression of the company's size. As a private corporation, KIS does not publish consolidated results. Crasnianski claims that when 1984 sales are added up, they will reach $1 billion. Business Week published Crasnianski's number last year. But a different picture emerges from interviews with KIS financial director Paul Peyrare and the company's French bankers, Bernard de Kesling of the Societe Lyonnaise de Banque and Daniel Janin of Banque Indosuez. Says de Kesling, ''We all have weaknesses; Crasnianski exaggerates everything. When he discusses 1984 results, he's really talking about what he hopes the company will do in 1985 or 1986.'' According to these sources, last year's sales came to about $250 million. THAT'S NOT BAD. Peyrare says sales tripled last year and cash flow kept pace, mushrooming to some $60 million. Net profits will make up more than half of that, Peyrare says, but he declines to give an exact figure. The goal, he declares, is to boost cash flow rather than profits to keep taxes as low as possible. One way KIS reduces profits is by making extremely liberal provisions for possible losses on bank loans to finance customers' purchases of KIS equipment--loans that KIS guarantees. ''We have to do a trapeze act because we're just a fly in the photo-processing business,'' says Crasnianski, who still owns all the shares. His financial aerial act has apparently allowed the company to finance most of its own growth. Peyrare and the bankers say KIS has only $3 million in debt. KIS has also benefited from a new tax break originally designed to encourage entrepreneurs. A 1983 French law exempted new companies from national taxes for three years. Since it was already a going concern, KIS didn't qualify. But last year the government amended the law to allow companies like KIS to take advantage of the loophole. The government lets KIS set up a subsidiary for each new product it produces and then grants the three-year exemption to that subsidiary. The new law didn't help too much last year because it didn't take effect until the second half. But KIS expects to reduce taxes considerably this year. At 6 feet 5 inches, Crasnianski, 42, strides through his domain with such giant steps that some associates jog to keep up. ''He's a work of art,'' says a former KIS distributor who is suing the company for breach of contract but remains dazzled by Crasnianski's elan. Employees find ''Monsieur Serge'' incredibly demanding. At his insistence an executive hobbled to work on crutches a few days after a serious car accident. Another cut short his sailing vacation, leaving his boat in Spain for others to bring home. No detail is too minute to command his attention. Each evening he scribbles down the bank balances from the U.S. subsidiary. ''Today,'' he says, ''the battle is won with details.'' Crasnianski was born in Grenoble to a French mother and a Russian immigrant father who owned a chain of dry cleaners. He learned the appeal of instant service by accident in 1960 when he lost the ignition key to his convertible. After a long search he got a copy from a machine made by ILCO, a Rocky Mount, North Carolina, manufacturer. While still a student he moonlighted as ILCO's Swiss sales representative. In 1963 he invented a machine speedier than ILCO's and used his savings of $4,000 to launch KIS. Crasnianski came late to photofinishing. By the time he started in 1980, mini-labs offering one-hour service were popular in Europe and the U.S. But the ''mini'' was something of a misnomer. The machines filled a room and could be operated only by experts. At $80,000 to $120,000 they had no appeal for the corner druggist or the operator of a small photo shop. Crasnianski saw his niche. The KIS mini-lab is a bantam photofinisher: it occupies about as much floor space as a standard copying machine and costs about $35,000. Running full tilt it processes fewer than 20 rolls an hour, vs. more than 50 for the bigger machines. But the low capacity, along with the low cost of the machine, made the mini-lab attractive to small businessmen. For example, Syosset Drug, a pharmacy in a New York suburb, pays about $1.95 for the paper, chemicals, and other materials used to process a 20-print roll of film. The customer pays $6.95. After all other expenses, including a part-time worker and payments on the machine, Syosset Drug earns almost $30,000 a year before taxes from photo processing. With numbers like that, the machine ought to sell itself. But KIS characteristically oversold it. In 1983 the company ran ads across America claiming that virtually any KIS owner could earn at least $55,000 a year from the machine; they added that the model then being sold, far slower than the current one, could process 80 rolls of film a day and that the maximum profit could reach $246,000 a year. Outraged KIS owners in San Diego and upstate New York formed a committee to complain to the company about the ads, poor training, and inadequate service. Admitting that the 80-roll figure was based on a 24-hour workday, the company has partly calmed the storm by toning down its ads and improving instruction and maintenance. KIS's image problems have left a large opening for competitors, and they're barging in. No fewer than 16 rival mini-labs are due out this year. Two Japanese photo-processing giants, Noritsu, the world's leading maker of the big mini-labs, and Konishiroku, maker of Konica cameras, are introducing machines that will compete directly with KIS's. At $39,000, both cost $4,000 more than the KIS version, but they offer advantages. A computer adjusts them for different types of film, while the KIS mini-lab requires hand tuning. Both Japanese units have higher capacity than their French rival, and the Konishiroku machine uses no piped-in water or other plumbing, so it can work in parking lots and other places the KIS machine cannot. % American challengers include Hope Industries of Willow Grove, Pennsylvania, and Durst North America Corp. of Tempe, Arizona. The U.S. manufacturers' disdain for KIS seems to exceed professional jealousy. ''KIS has given the industry a bad name,'' says Bill Waldheim, sales manager for Durst. Adds Jim Edelstein, an executive with Hope: ''They have a love 'em and leave 'em attitude toward customers.'' CRASNIANSKI shrugs off such comments, while his labs in Grenoble churn out new products and improvements. Due out soon is a mini-lab with increased capacity and automatic adjustment for different film types. KIS plans a foray into the fast-food business in France with automated kiosks equipped with ovens that bake instant croissants and cookies. The color copier is scheduled to go on sale this spring. Called the Color 1, it is strikingly different from color copiers made by Xerox and Canon, which use the same electrostatic printing process as black- and-white machines. The Color 1 photographs the original and prints it on photographic paper. The process enhances the colors and thus produces somewhat brighter copies than its rivals. The Color 1 is easy to use but slow. It produces the first copy in six minutes and extra ones every 36 seconds after that. The Canon, by contrast, produces five copies in a minute and the Xerox turns out three. The price of the Color 1, however, is just $6,000, vs. $52,000 for a Canon model and $23,800 for a Xerox. Crasnianski's formula of instant gratification seems as good as ever. But with so many competitors catching on to it, future growth depends on a lot more than hype.